Arabic native speaking children are born into a unique linguistic context called <i>diglossia</i> (Ferguson 1959). In this context, children grow up speaking the specific spoken variety of Arabic used in their immediate environment (hereafter, Spoken Arabic, SpA). At school, they are formally exposed to a different, yet linguistically related variety, Standard Arabic (hereafter, StA) which is the variety encoded in print. SpA and StA are phonologically distant, with some phonemes used only in StA but not in SpA. This paper reviews recent research examining the effect of the phonological distance between StA and SpA on children&#8217;s phonological processing. The results obtained from a series of studies indicate that phonological processing among children is directly affected by the phonological distance between the two varieties. This effect emerges even in the presence of accurate articulation of distant phonemes; it surfaces in phonological production as well as phonological recognition tasks, and it persists across the early grades. The effect of the phonological distance on phonological processing in Standard Arabic is argued to be attributed to low-quality phonological representations.